Multiple activities are involved in processing a transaction between a consumer and a merchant for a product or service that is payable upon an account issued to the consumer by an issuer within a payment processing system. Typically, processing of the transaction involves an authorization activity followed by a clearing and settlement activity (collectively “remittance”). Clearing includes the exchange of financial information between the issuer and an acquirer of the merchant and settlement includes the transfer of funds.
Referring to FIG. 1, a cross-functional flow chart depicts an exemplary method of authorizing and remitting a transaction using an account identifier of the account. When the merchant and the consumer engage in the transaction, the consumer may give the merchant the account identifier (e.g., the account number) of a corresponding account of the consumer upon which the transaction is to be made payable. The account identifier is then used throughout both the authorization and the remittance of the transaction to distinguish the transaction from among many of the transactions.
At a step 102, the merchant may transmit to the issuer, via an acquirer, an authorization request including the account identifier and a quantity of funds to be authorized by the issuer. The acquirer forwards the authorization request to a transaction handler who in turn forwards the authorization request to the issuer. At step 106, the issuer verifies whether the account identifier is valid or whether the balance of the account corresponding with the account identifier can cover the quantity of funds. The issuer forms, for forwarding to the merchant, an authorization response to the authorization request including the account identifier. Depending on the response to the authorization request, the merchant may release the good and/or service to the consumer or decline releasing of the good or service to the consumer at a step 110.
Several verifications can occur during the authorization. For instance, the issuer may verify (i) the integrity of the account; (ii) an available balance of the account as greater than or equal to the payment (e.g., the quantity of funds to be authorized by the issuer); (iii) that the account is an account that the issuer issued to the consumer; or (iv) a combination of the forgoing. The transaction handler may evaluate the authorization request to determine if the authorization request is populated according to predetermined standards, or the transaction handler may verify that the account is part of a loyalty program within the payment processing system. The acquirer may verify that the acquirer is associated with the merchant. Moreover, a risk analysis may be done on the account to determine a likelihood that there will be a successful clearing and settling of the payment from the account based on features of the account such as: the category of the account (e.g., gold card versus platinum card), the geographical location of the branch of the issuer where the account was first opened, a past transaction history of the account including a rate at which multiple past remittances were successfully conducted, or a combination thereof.
Similarly, during remittance, the account identifier is used to route the payment to the merchant and to match the payment with the corresponding authorization. At a step 114, the merchant may batch multiple clearing and settling requests of multiple transactions into one transmission, wherein each clearing and settling request in the batch is associated with a corresponding account identifier. The transmission for the batch is submitted by the merchant to its acquirer who in turn forwards the batch to the transaction handler. The acquirer or the transaction handler use the account identifier to sort the transactions within the batch based on each corresponding payment processing system of the account (e.g., Visa, MasterCard, or American Express). At a step 116, the transaction handler uses the account identifier of each corresponding clearing and settling request within the received batch to determine which issuer should receive the corresponding clearing and setting request.
At a step 118, the issuer receives the corresponding clearing and settling requests each including a corresponding account identifier. For each clearing and settling request, the issuer withdraws the payment from the account corresponding to the account identifier and forwards the payment to an issuer clearing bank. At a step 120, the issuer clearing bank forwards the payment associated with the account identifier to a transaction handler settlement bank. At a step 122, the transaction handler settlement bank forwards the payment associated with the account identifier to an acquirer settlement bank. At a step 124, the acquirer settlement bank forwards the payment associated with the account identifier to the acquirer. At a step 126, the acquirer makes the payment associated with the account identifier available to the merchant. Finally, at a step 128, the merchant receives the payment and uses the associated account identifier to balance the accounting of the transaction, such as by matching the payment with a corresponding authorization response from among a plurality of authorization responses.
Other steps that the transaction handler, or other entities within the payment processing system, may conduct during remittance include: adjudicating the final quantity of funds, determining how the payment can be transferred from the issuer to the acquirer, evaluating fees that may apply in transferring the funds, applying a foreign-to-domestic currency conversion, if applicable, or a combination thereof.
Reliance on the account identifier, in whole or in part, to distinguish the transaction from among the plurality of transactions within the payment processing system exposes the corresponding consumer to risks. For example, the merchant may locally store a plurality of the account identifiers for later submission of corresponding clearing and settling requests. Storing the account identifier of a corresponding consumer may pose risks to the corresponding consumer such as when unauthorized access to the stored account identifier leads to theft, fraud, or credit damage.
The foregoing points out a need to provide secure processing of authorization and remittance of transactions payable upon the account within the payment processing system.